Types of Vehicle
Since 1996 Limited Liability Vehicles (LLV) have been the structure used for trading investors to enter the Lloyd’s market.
An LLV is designed specifically for trading at Lloyd’s. As a new entrant with private capital, you cannot trade by any other means at Lloyd’s and the LLV itself cannot be used for any other business activity. The benefit to clients is that the LLV limits your exposure to the Funds at Lloyd’s, those assets used to support your underwriting and the value of any other assets in the LLV only. Any assets outside of the LLV are not exposed.
LLV’s come in two forms: a Limited Company (called a NameCo) or a Limited Liability Partnership (LLP).
Personal circumstances and objectives for underwriting at Lloyd’s will need to be understood before making a decision as to which type of LLV is right for you. The main differentials are tax implications and family wealth structure.
As a brief guide some of the decisive factors for NameCos are:
- Profits in a Nameco are assessable to corporation tax
- Income tax is payable on any dividends you then receive as a shareholder of a NameCo
- Nameco provides opportunity for repayments of any proprietor’s loan
- Assets can be held in the name of the NameCo or by the shareholder / director and provided as third party loan to the NameCo (implication for inheritance tax)
And for LLPs some of the decisive factors include:
- Partners pay income tax and National Insurance on underwriting profits as they arise, regardless of whether the profit is taken out of the LLP or remains in it. This is because an LLP is a tax transparent vehicle.
- Income is shown on a partnership tax return and transferred to a personal return each year
- Assets can be held in the name of the LLP or by the partner (no implication for inheritance tax)
- Some pension contributions can be paid directly from the LLP
We would advise on thorough discussion with your Hampden and Nomina contacts before deciding on which structure of LLV you wish to proceed with when joining the Lloyd’s market.